EXCLUSIVE: Minnesota workers say leaders rejected years of fraud warnings

By Jared Strong
The Center Square

Claims from current and former Minnesota state employees that have been vetted by state lawmakers allege their bosses ignored and rebuked fraud warnings for years, retaliated against the employees who raised the alarms and protected leaders who oversaw the fraud-laden programs, according to a whistleblowers’ letter obtained by The Center Square.

The claims are made in an unsigned letter to Congress as it investigates fraud schemes that bilked government assistance programs for hundreds of millions of dollars in the state.

Some employees claimed they were accused of racism, in part because the money was flowing to “diverse communities,” the letter said. Most of those who have been federally indicted for the fraud schemes are of Somali descent.

Minnesota state Rep. Kristin Robbins – a Republican who leads a state investigation into the fraud and has communicated with the letter’s authors –submitted the letter as part of her testimony to federal lawmakers this month. Its contents have not been previously reported.

Specifically, the letter focused on the state’s Housing Stabilization Services program, which awarded taxpayer dollars to organizations to ensure housing for older residents and those with disabilities, significant mental illness and substance-abuse disorders.

That program – initially estimated to cost less than $3 million each year when it launched in 2020 – swelled to about $104 million in 2024 and was on track to surpass that figure in 2025 before the program was shuttered, according to federal court records.

More than a dozen people have been indicted in recent months for fraud schemes related to the program.

Eric Grumdahl, an assistant commissioner for the Department of Human Services who oversaw the program, was fired in September, shortly before he was expected to testify before a state committee that is investigating the fraud, Robbins has said.

The whistleblower group that penned the letter said concerns about the program – the first in the nation to offer Medicaid coverage for the housing services – culminated in late 2022, when state employees pressed Grumdahl to act.

“His response to staff was alarming,” the letter said. “Fraud concerns … were strongly dismissed and numerous employees experienced serious retaliation.”

State employees who aired their worries about fraud allege they were the subject of repeated internal investigations and surveillance, work reassignments and veiled threats about their employment.

“You will never get another state job,” one employee was allegedly told.

In January 2023, state workers took their concerns to top Department of Human Services leadership, human resources administrators and auditors, and later to the governor’s office.

The next month, the department’s then-leader, Jodi Harpstead, told hundreds of employees in an all-staff meeting “to stop reporting concerns that she did not feel were relevant,” the letter said.

Harpstead resigned in February 2025.

At the time, Gov. Tim Walz praised her job performance.

“I am proud of her work running the most complex and wide-ranging agency in state government,” he said.

Harpstead’s successor, interim Commissioner Shireen Gandhi, said the department has taken steps to “change the culture” to be more receptive to employee feedback.

“When employees feel heard and trusted, they are better positioned to surface risks early, improve systems, and deliver strong outcomes for Minnesotans,” she said in a statement her department provided to The Center Square.

The department did not directly respond to the contents of the whistleblowers’ letter.

In recent months, 13 people have been accused of federal crimes for fraud schemes related to the housing program. They submitted claims to the state for about $14 million worth of reimbursements, court records show.

The people are accused of drastically overstating the actual help they provided to people who need housing assistance and of using the public money instead for personal expenses, such as buying land in Kenya and investing in cryptocurrency.

“What we see are schemes stacked upon schemes, draining resources meant for those in need,” former U.S. Attorney Joseph Thompson said in September, when the first federal charges related to the Minnesota housing program were announced. “It feels never ending.”

Fraud investigations related to the housing program and other assistance programs in Minnesota are ongoing. They have identified about $300 million of fraud related to the former Feeding Our Future organization, which had claimed it provided meals to children. That government aid was overseen by the state Department of Education.

The whistleblower letter said Human Services employees reported their concerns about contract irregularities, fraud potential, lax oversight, unusual financial transactions, compliance failures, improper promotions and others, repeatedly between 2019 and 2025 about a variety of programs.